Concerns raised about impact of PBM merger

WASHINGTON – The National Association of Chain Drug Stores wants to ensure that Congress has the facts straight regarding the planned merger of Express Scripts Inc. and Medco Health Solutions Inc.

In a letter to Sen. Herb Kohl (D., Wis.) last month, NACDS said Express Scripts chief executive officer George Paz and Medco CEO David Snow made “misleading statements” in testimony at a Senate Judiciary subcommittee hearing on the two pharmacy benefit managers’ merger deal, which is being reviewed by the Federal Trade Commission.

Mike Bettiga, chief operating officer of Shopko Stores Operating Co., testified on behalf of NACDS at the December 6 hearing, held by the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, chaired by Kohl. However, in its follow-up comments to Kohl, NACDS noted that the PBM executives downplayed the “potential harmful impact” of the proposed Express Scripts-Medco merger.

“We agree with your opening comment that employers do have considerable concerns about this merger but are reluctant to voice their concerns publicly due to fear of retaliation by the [PBM] entities seeking to merge. This reluctance and fear illustrates clearly many of our concerns about the proposed merger and the impact it would have on health plans and employers. The large PBMs wield similar power over pharmacies, as was discussed during the hearing,” NACDS stated in the letter to Kohl.

“We felt compelled to write to you and correct statements made during the hearing by Mr. Paz and Mr. Snow. We believe that these witnesses obfuscated facts in an effort to portray their companies in a better light, downplaying many of their companies’ objectionable activities that would certainly worsen if the two companies were allowed to merge.”

For example, NACDS questioned Snow’s testimony that all state boards of pharmacy and state insurance commissions regulate Medco. “PBMs have generally been successful in opposing efforts at state regulation. Only a couple of states directly regulate the activities of a PBM through a board of pharmacy, and the regulation in those states is weak, at best,” NACDS stated in its comments to Kohl. “As such, boards of pharmacy are limited in their oversight of PBMs.”

According to NACDS, Snow and Paz also claimed that PBMs don’t make any decisions in the design of prescription drug benefits but only follow the orders of the health plans and ­providers.

“We believe that these assertions are misleading. PBMs design the benefit plans and determine the costs. Because of that, it is our view PBMs steer the health plans and employers toward the items they most want to sell,” NACDS said in the letter. “They set prices in a way that pushes orders for products and services (mail order, brands with big rebates, etc.) that the PBMs want customers to order, and creates disincentives for services (e.g., retail) and items (e.g., drugs from manufacturers that don’t pay kickbacks) that the PBMs don’t want their customers to order.”

NACDS raised questions, too, about the savings that PBMs achieve and transparency regarding rebates and discounts from pharmaceutical firms. The association noted that this point “has taken on tremendous significance amid the controversy surrounding the merger,” since consumer groups and elected officials have voiced concern that the merged PBM would pass along cost savings to consumers, employers and health plans.

Snow and Paz, meanwhile, have said that the economies of scale achieved by the merged company would lower the cost of prescription drugs for Americans.

“We will lower drug costs that are far too high and improve health outcomes for consumers,” Paz testified at the Senate subcommittee hearing. “As the big drug companies merge, as large chain drug stores buy up their competition and demand higher prices, we must become more effective representing the interests of plan sponsors and consumers.”

Snow told lawmakers at the hearing that the merger reflects the “transformation of America’s health care system” to deliver more for less. “With the combined expertise and capabilities of Medco and Express Scripts, we will be able to speed the pace of delivering value-added solutions that address the pressing need to reduce overall costs and raise the standard for quality care,” he testified.

The chief concern of opponents of the merger is that it would simply create a PBM that’s too large, giving it the market power to force consumers to use its mail order pharmacy service and curtail patient access to drug stores.

As of presstime, about 30 members of Congress had formally questioned the merger deal, and nearly 30 state attorneys general have formed a working group to do their own review of the merger proposal.

“If this merger is allowed to proceed,” NACDS said in its letter to Kohl, “patients will be faced with reduced access to retail pharmacies and pharmacy services, as the combined entity shifts patients to mail order and dominates specialty pharmacy. We believe that you should consider the testimony of Mr. Paz and Mr. Snow as illustrative of how their respective companies presently conduct themselves, which would only be exacerbated by a merger.”